Stocks rise after strong inflation report, Buffett bets $4 billion on chipmakers

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Shares rose Tuesday morning before settling in modest gains, with Berkshire Hathaway’s latest investments leading the rally after another promising inflation report sparked hopes that the Federal Reserve will soon move away from its most aggressive monetary policy in decades.

Main facts

The S&P 500 was up 0.9%, the tech-heavy Nasdaq was up 1.5% and the Dow Jones Industrial Average climbed 0.2%.

The latest gains follow October’s producer price index reading, which last month was just 0.2% higher than economists’ estimates, indicating the Fed’s battle to fight inflation will soon slow down with improving inflation data, with Jeffrey Roach, LPL Financial’s chief economist, predicts that the Fed will only raise rates by 0.50% next month and will soon rise slowly to 0.25%, a significant moderation after four consecutive 0.75% rate hikes.

All three major indices are up 2% or more over the past week on increasing signs of declining inflation, with the Dow having its best day in more than two years on Thursday after the last reading of the consumer price index, the other most-watched metric tracking inflation .

Taiwan Semiconductor rose 10.5% after Warren Buffett’s company announced a $4.1 billion stake in the chipmaker.

Berkshire Hathaway’s other newly revealed investments Louisiana-Pacific and Jefferies Financial Group gained 7.8% and 0.3%, respectively, and Paramount rose 5.1% after Buffett revealed a larger stake in the media giant.

Shares of New York-listed Chinese companies were also among the biggest gainers as ties between Beijing and Washington appear to improve following President Joe Biden’s first face-to-face meeting with Chinese President Xi Jinping during his term in office, involving Alibaba, Tencent and Pinduoduo. each rise at least 9%.

contra

Despite the market’s recent optimism, it’s far too soon to declare the war on inflation over, says Comerica Bank chief economist Bill Adams. “Chairman Powell feels burned after seeing inflation slow temporarily in 2021 only to flare up again in 2022, and he doesn’t want to make the same mistake twice,” Adams wrote. “The Fed will wait until they are pretty sure inflation is cooling down before they take their foot off the brake.” Major investors are similarly hesitant to express overly optimistic outlooks, with a Bank of America survey of major fund managers released ahead of Tuesday’s stock rally showing continued unease among major investors. into a recession next year.

Surprising fact

Netflix shares rose 3.7% to $310.20, for the highest closing price in seven months. The streaming giant’s recovery comes after analysts at Bank of America raised Netflix’s rating with a price target of $370, signaling an upside of about 20% even after Tuesday’s jump, citing the company’s strong trail. for subscriber growth and ad revenue.

Read further

Chipping In: Warren Buffett’s Berkshire Hathaway Takes a $4 Billion Stake in Taiwanese Semiconductor Giant TSMC (TBEN)

Recession fears reach new highs even as inflation slows: here’s what fund managers predict for 2023 (TBEN)

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